Price Chaos Looms as Sweeping US Tariffs Upend Global Commerce

There are days when a plunge in the markets clears the air, and when sweeping global policy changes — from the top down, via the office of the president — might mark a shift in direction, but the overall path is well-charted.

Thursday (April 3) did not feel like one of those days. The stage was set on Wednesday night for more questions to swirl around tariffs than answers, touching on everything from how they were calculated to who’s most affected; in terms of the goods, from grocery staples to cars that suddenly look like they’re going to be a lot pricier.

We have stepped back to draw a breath and offer a roundup of sorts — at least a rundown of this first day of what seems to be a sweeping new order to global trade. 

The dust has not settled, but from the moment President Donald Trump’s announcements on Wednesday (April 2) crystalized where tariffs would be levied, and the percentages allocated to each of more than 180 nations, attention was laser-focused on what are expected to be the hardest hit areas of the connected economy. Among them: smartphones, consumer electronics and automobiles.

And while entire research papers and analysis will be forthcoming from several sources including the U.S. government, the short-term impact was described as “shocking.”

The Dow Jones average was down 1,600 points for the day Thursday with companies that depend on imports taking the biggest hits: Apple, Nike and Wayfair led this group, but they were hardly alone. Shares of Apple, on track for their worst day since March 2020, erased $300 billion from its market cap. The largest risk, according to analysts, centers on the iPhone maker’s overseas production hubs, which are particularly vulnerable to the tariffed countries.

Automotive companies were also hard hit. Twenty-five percent tariffs on imported cars are now in effect in the U.S., and as The New York Times reported Thursday, it’s a policy that Trump argues will lead to investments and jobs in the American car industry. Analysts, meanwhile, say the levies will drive up the price of new vehicles by thousands of dollars.

Bloomberg reported that Jeep-maker Stellantis plans to temporarily halt some production in Canada and Mexico. Ford began offering steep discounts, and General Motors plans to boost U.S. pickup truck output. Volkswagen meanwhile warned dealers that it will tack on import fees to the vehicles it ships to the U.S., while Toyota is cutting overtime at a factory in Mexico.

U.S cryptocurrency stocks fell as well in early trading Thursday following the latest White House tariffs. As Reuters reported, bitcoin fell 2.3%, with ether down 3.3%. While Trump appears more crypto-friendly than his predecessor, the report noted, wilder economic instability tied to the sector could still affect some companies. However, some analysts argue the price drops were less dramatic than in other industries.

“The price action highlights crypto’s hyper-democratic and borderless nature, allowing investors worldwide to hedge against the potential impact of macroeconomic uncertainties,” said David Hernandez, crypto investment specialist for 21Shares.

Crypto exchange traded funds (ETFs) could also see some retail investors who will be hunting for opportunities, Marco Iachini, senior vice president of research at Vanda Research told Reuters, adding the size of that flow could shrink in shakier conditions.

Travel stocks also slumped. “What you’re seeing in the travel stock movement is uncertainty,” Oppenheimer analyst Jed Kelly told The Wall Street Journal. “It’s more of a sentiment-related issue, and when sentiment’s not as good, people don’t travel as much.”

As the day progressed, however, there was a steady stream of questioning online and on TV and elsewhere about just how the tariff policy was formulated. More color was added to the debate about how much prices would actually rise for consumers in these and other areas.

Several economists got hold of the algorithm that Trump’s team used to arrive at their tariff rates. For example, NPR’s Planet Money outlined a methodology in which tariff levels are linked to the size of the trade imbalance with a specific country. For instance, a hypothetical 67% tariff on Chinese goods was suggested based on the import volume compared to exports.

The administration’s calculations include assumptions about the pass-through of tariffs to consumers and the resulting decrease in demand for foreign goods. Their formula — as interpreted by NPR — suggests that for every 10% increase in tariffs, prices would rise by 2.5%, and a corresponding 10% price increase would lead to a 40% drop in import demand. Applying this to the example of China, a 67% tariff was projected to increase prices by 16.75% and reduce demand by 67%.

However, it is important to note that economists analyzing previous Trump tariffs have found that a much larger portion of the tariff costs, nearly the full amount, was passed on to American consumers, according to NPR.

Furthermore, it stated, the current calculations are acknowledged to be broad and do not account for variations across industries or potential retaliatory measures from other countries, which could further influence prices and trade dynamics.

These formulas and the rough estimates of the price increases that might be staring consumers in the face in the aisles or online in the near and longer term come at a time when — as PYMNTS Intelligence has long chronicled — consumers been taking note of the increased costs of all manner of items.  

Prepackaged products, for example, had been cited by 78% of consumers as costing more; household goods were close behind at 77%. Consumer sentiment was already dropping over worries tied to tariff-induced price increases; one would be hard-pressed to think that households are feeling more sanguine about things right now. 

If simply getting around — in our cars, or keeping them in shape enough to be on the road — is most immediately more expensive, there’s less money to go around for discretionary spending on apparel or beauty items, which will be more expensive, too, if they’re imported into merchants’ inventory. 

In separate reporting on Thursday, we recounted how companies are planning to meet the challenges of a trading environment yet to be clearly defined, through supply chain flexibility and reconfigurations, and financing, in leu of simply jacking up prices. 

Retaliatory tariffs are certainly not out of picture, which in turn injects more uncertainty into the picture for U.S. firms that rely on overseas markets to keep their own sales momentum intact. 

The dust is far from settled. Early April’s already shaping up to be a week that, for good or for ill, heralds historic change to an intricate web of commerce that had been constructed over decades.

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